Keppel DC REIT share price on form!
Lifetime Membership It’s a tale of two S-REITs. While Mapletree Logistics Trust share price continued its dismal form in 2024, Keppel DC REIT share price went from strength to strength to hit a recent high of $2.20. In fact, year-to-date, the former declined 25% whilst the latter rose by a staggering 22%. Given that both S-REITs are heavily leveraged (about 40%) and majority-owned by Temasek Holdings, what could be the driving factor for the bullish form of Keppel DC REIT share price?
The last time that I covered Keppel DC REIT share price was on 28 December 2023. Time flies. It has been a year and within this period, Keppel DC REIT share price went through a bad patch. Back then, the data centre S-REIT was in some sort of turbulence due to litigation with DXC Technology and rental defaults by Guangdong Bluesea Data. The China fiasco also cast a negative spotlight on the other China data centres currently under development in Shanghai, Guangdong and Beijing.
Against this backdrop, I had predicted that Keppel DC REIT share price could be in for a rough ride, which it did as the counter dropped to a low of $1.60 in February 2024. However, a series of positive developments happened in 2024 that caused Keppel DC REIT share price to turn the page. On 13 February 2024, investors must be rejoiced that the S-REIT has reached an amicable settlement with DXC that would see payment of $13.3 million be made by DXC to KDC by April 2024.
The settlement with DXC sparked off a bull run for Keppel DC REIT share price as the counter went on a splendid rally, surging from $1.60 in April 2024 to the recent $2.20. Another driving factor for the bull run of Keppel DC REIT share price was the divestment of the Sydney data centre at 35.4% premium over valuation. Unitholders viewed the transaction favorably as Keppel DC REIT re-invested $78.7 million of the sale proceeds into an Australia Data Centre Note (AU DC Note), which allow the S-REIT to retain its exposure to the Australia data centre market, and receive a regular income stream starting from approximately $5.5 million per year for 8.5 years.
Keppel DC REIT share price crashed to Earth
Keppel DC REIT share price in mystery slump
As 2024 comes to an end, many unitholders must be looking forward to 2025 due to the possibility of further interest rate cuts. The high interest rates have been longer than expected and this has caused a delay in the recovery of S-REITs sector in 2024. Like many S-REITs, KDU has been struggling with higher interest costs, with finance costs in 1HFY2024 surging 14% year-on-year to hit $26 million. This caused DPU for 1HFY2024 to drop 10% year-on-year. Despite so, it seems that daylight is just around the corner for the S-REITs as the Fed should continue trimming interest rates in 2025.
The resilience of Keppel DC REIT share price and the strategic moves by the S-REIT for the past one year raised my interest in this counter. And then the latest MAS requirement also comes into play when the regulator imposed new interest coverage ratio (ICR) on the S-REIT sector recently. In this article, I will share my insights on Keppel DC REIT share price in 2025.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested in Keppel DC REIT share currently. Whether Keppel DC REIT share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Keppel DC REIT share price sinks or swims in 2025?
Keppel DC REIT share price used to be flying high and even smashed to a record of $3.00 in August 2020. But all these changed overnight due to the ill-fated [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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